ABB LTD, ZURICH, SWITZERLAND, FEBRUARY 28, 2019 Solid growth - - PowerPoint PPT Presentation

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ABB LTD, ZURICH, SWITZERLAND, FEBRUARY 28, 2019

Solid growth

Full-year and Q4 2018 results

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Draft – Privileged and Confidential – Prepared at the request of Counsel This presentation includes forward-looking information and statements including statements concerning the outlook for our businesses. These statements are based on current expectations, estimates and projections about the factors that may affect our future performance, including global economic conditions, and the economic conditions

• f the regions and industries that are major markets for ABB Ltd. These expectations, estimates and projections are generally identifiable by statements containing words

such as “expects,” “believes,” “estimates,” “targets,” “plans,” “outlook”, “on track”, “2019 framework” or similar expressions. There are numerous risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking information and statements made in this presentation and which could affect our ability to achieve any or all of our stated targets. The important factors that could cause such differences include, among others: – business risks associated with the volatile global economic environment and political conditions – costs associated with compliance activities – market acceptance of new products and services – changes in governmental regulations and currency exchange rates, and – such other factors as may be discussed from time to time in ABB Ltd’s filings with the U.S. Securities and Exchange Commission, including its Annual Reports on Form 20-F. Although ABB Ltd believes that its expectations reflected in any such forward-looking statement are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved. Some of the planned changes might be subject to any relevant I&C processes with the Employee Council Europe and / or local employee representatives / employees. This presentation contains non-GAAP measures of performance. Definitions of these measures and reconciliations between these measures and their US GAAP counterparts can be found in the ‘Supplemental reconciliations and definitions’ section of “Financial Information” under “Quarterly results and annual reports” on our website at www.abb.com/investorrelations

Important notices

February 27, 2019 Slide 2 February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

2018 results1: growth momentum built, transformation defined

February 27, 2019

1On December 17, 2018, ABB announced an agreed sale of its Power Grids division. Consequently, the results of the Power Grids business are

presented as discontinued operations. The company’s results for all periods have been adjusted accordingly. Net income, EPS and Cash flow from operating activities include results from continuing and discontinued operations; 2From continuing operations; 3Net Promoter Score

4Estimated net cash proceeds of $7.6-7.8 billion from 80.1% sale

Slide 3

Group operational EBITA margin 10.9%, impacted by stranded costs, non-core charges, GEIS dilution Strong operating result in RM, steady in IA, EP impacted by GEIS PG transformation progressed, transaction announced Net working capital improved, cash generation solid2

Profitable Growth Relentless Execution Business-led Collaboration

Orders +8%, revenues +4%, book to bill 1.03x Growth in all divisions and regions ABB Ability™ recognized as a globally leading offering for Industry 4.0 Closed acquisition of GEIS, integration of GEIS and B&R well under way Customer satisfaction NPS3 of 57%, from 16% in 2010 Global brands strengthened, first year of ABB Formula E

Proposed dividend per share of CHF 0.80 – 10th consecutive increase underlines confidence in future Transformation

Shaping a leader focused in digital industries through three fundamental actions:

• 1. Focus of portfolio on digital industries through divestment of Power Grids, crystallizing $11 bn in value for shareholders4
• 2. Simplify business model and structure
• 3. Shape four leading businesses

February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

Results summary

1On a comparable basis, yoy; 2FY 2018 margin impacted by a combined 250 basis points due to stranded cost, legacy non-core business

charges and GEIS dilution; 3Q4 18 margin impacted by a combined 400 basis points due to stranded cost, legacy non-core business charges and GEIS dilution; 4Operational EPS growth in constant currency terms (2014 foreign exchange rates), continuing and discontinued

• perations; 5Cash flow from operating activities, continuing and discontinued operations

February 28, 2019 Slide 4

FY 2018 Q4 2018

Orders

$28.6 bn +8%1

Revenues

$27.7 bn +4%1

Cash flow from

• perating activities

$2,924 mn5

Orders

$7.0 bn +7%1

Revenues

$7.4 bn +5%1

Operational EBITA margin

7.9%3

• 180 bps

Cash flow from

• perating activities

$1,867 mn5

Operational EPS

$1.33 +8%4

Operational EBITA margin

10.9%2

• 30 bps

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Draft – Privileged and Confidential – Prepared at the request of Counsel

Full-year and Q4 2018 orders

February 28, 2019

1yoy comparable; 2AMEA: Asia, Middle East and Africa

Slide 5

Order growth in all regions

FY 2018 total orders +8% yoy1

Growth by region and key country markets in $ terms1

USA Canada Brazil AMERICAS Germany Italy Sweden EUROPE China India

• S. Korea

AMEA2 +7%

• 7%

+34% +7% +9% +17%

• 19%

+6% +9% +24% +2% +10%

Q4 2018 total orders +7% yoy1

Growth by region and key country markets in $ terms1

USA Canada Brazil AMERICAS Germany Italy Sweden EUROPE China India Australia AMEA2 +8% +1% +52% +12% +6% +19%

• 7%

+7%

• 8%

+16% +8% +4%

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Draft – Privileged and Confidential – Prepared at the request of Counsel

$ mn and change yoy, unless otherwise stated

Electrification Products Industrial Automation Robotics and Motion Orders

Comparable

11,867 +4% 7,631 +8% 9,570 +12% Revenues

Comparable

11,686 +3% 7,394 +1% 9,147 +8% Operational EBITA 1,626 +8% 1,019 +7% 1,447 +15% Operational EBITA margin 13.9%1 (110) bps 13.8% (10) bps 15.8% +80 bps

Full-year 2018 divisional results

February 27, 2019

1Electrification Products operational EBITA margin includes GEIS contribution for the H2 period, which impacted the full-year divisional result

by 140 basis points Slide 6

Orders and revenues up in all divisions

February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

16.1 14.7 15.2 16.0 13.5 11.7

Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Operational EBITA margin (%)

Q4 2018 Electrification Products

February 28, 2019

1Large orders includes large orders (defined as orders above $15 mn) and internal Group orders; 2On a comparable basis; 3Expected impact of

GEIS integration in H2 2018 ~260 basis points dilutive on 15-19% target margin corridor range. Guidance issued at Q2 2018 results Slide 7

GEIS in line with expectations

Orders $3,139 mn Third-party base orders +3% yoy2 Strong growth in products, e.g. data centers, process industries; construction robust Tough comparable Revenues $3,320 mn Order backlog end Q3 +8%, end Q4 +7% yoy Operational EBITA $388 mn Margin yoy -300 bps GEIS dilution -210 bps Positive mix, cost savings and pricing actions

• ffset by contractual charges (~90 bps)

% $ mn

0%

1

7 10 3 6 6 2

• 5

5 10 15 2,000 2,200 2,400 2,600 2,800 3,000 3,200 3,400

Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Large orders 3rd party base orders Comparable total orders (% yoy)

5

• 1

2 4 3 3

Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Comparable revenues (% yoy) GEIS impact on target corridor, H2 18 guidance3

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Draft – Privileged and Confidential – Prepared at the request of Counsel

Q4 2018 Industrial Automation

February 28, 2019

1Large orders includes large orders (defined as orders above $15 mn) and internal Group orders; 2On a comparable basis

Slide 8

Good order growth

Orders $1,866 mn Third-party base orders +4% yoy2 Broad based growth: strength in pulp & paper, mining, marine; O&G robust B&R good Revenues $1,938 mn Strong backlog execution Order backlog end Q3 -2%, end Q4 +2% yoy Operational EBITA $251 mn Margin yoy -200 bps One-time customer payment default (~80 bps) Tough comparable

% $ mn

0%

1

10

• 1

4 15 7 8

• 15
• 10
• 5

5 10 15 20 1,000 1,250 1,500 1,750 2,000

Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Large orders 3rd party base orders Comparable total orders (% yoy)

1 3

Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Comparable revenues (% yoy)

13.4 14.9 14.1 14.1 14.1 12.9

Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Operational EBITA margin (%) Target corridor 2015-20

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Draft – Privileged and Confidential – Prepared at the request of Counsel

8 6 8 8 7 11 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Comparable revenues (% yoy)

Q4 2018 Robotics and Motion

February 28, 2019

1Large orders includes large orders (defined as orders above $15 mn) and internal Group orders; 2On a comparable basis

Slide 9

Strong growth and execution

Orders $2,175 mn Third-party base orders +6% yoy2 Large orders from automotive, rail Continued demand in process industries Revenues $2,341 mn Good backlog execution, book-and-bill Order backlog end Q3 +10%, end Q4 +10% yoy Operational EBITA $349 mn Margin yoy +120 bps Positive volumes, continued cost management

% $ mn

0%

1

4 6 11 11 15 11

5 10 15 20 1,000 1,500 2,000 2,500 3,000

Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Large orders 3rd party base orders Comparable total orders (% yoy)

16.4 13.8 15.3 16.1 17.0 15.0

Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Operational EBITA margin (%) Target Corridor 2015-20

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Draft – Privileged and Confidential – Prepared at the request of Counsel

FY 2017 FY 2018 Q4 2017 Q4 2018

Operational EBITA margin 11.2% 10.9% 9.7% 7.9% PG related stranded costs

• 110 bps
• 110 bps
• 110 bps
• 100 bps

Non-core charges

• 70 bps
• 100 bps
• 200 bps
• 260 bps

GEIS dilution n.a.

• 40 bps

n.a.

• 40 bps
• 180 bps
• 250 bps
• 310 bps
• 400 bps

Group operational EBITA impacts

February 27, 2019 Slide 10 February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

Q4 2018 operational EBITA

February 28, 2019

1Including impacts from contractual charges in EP division and one-time customer payment default in IA division

Slide 11

Operational EBITA bridge Q4 2017 to Q4 2018 ($ mn)

9.7% op. EBITA margin 7.9% op. EBITA margin

Net savings Commodities Invest growth,

• incl. digital

Forex

• Op. EBITA

Q4 2017

671

Mix Acq./Div. Net volume

• Op. EBITA

Q4 2018 Other1

552

594

• 15
• 23

+31

• 29

664 +110

• 92
• 70

+24

• 16

Non-core 584

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Draft – Privileged and Confidential – Prepared at the request of Counsel

584 275 317 75 129 49 56 65 28 135 Q4 18 Op. EBITA PPA-related amortization Restructuring related Acquisition costs etc. Other non-operating items Q4 18 Reported EBIT Finance expense, taxes, other Discontinued operations Minorities Q4 18 Net income

Q4 2018 net income drivers

1Other non-operational items plus changes in obligations related to divested businesses, changes in pre-acquisition estimates, gains and

losses from sale of businesses and foreign exchange/commodity timing differences; 2Acquisition / separation costs contains acquisition and acquisition related costs, integration costs and separation and transaction related costs February 28, 2019 Slide 12

Key non-operating items

Restructuring including ~$65 mn accelerated delivery of ABB-OS™ simplification plans Power Grids related transaction and separation costs ~$25 mn

Discontinued operations (Power Grids)

Net income ~$135 mn, reflects restructuring, ongoing Power Up program

Operational EBITA to net income walk Q4 2018 ($ mn)

Acquisition / separation costs2 Other non-operational items1

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Draft – Privileged and Confidential – Prepared at the request of Counsel

$ mn unless otherwise stated

FY 2018 recast FY 2019 framework Q1 2019 framework Corporate & other operational EBITA

Of which, stranded costs (gross) Stranded cost elimination

(1,087)

(297)

~(800)

~(300) ~60

~(200)

~(75) ~10

Non-operating items

Normal restructuring (107) ~(100) ~(25) Simplification program1 (65) ~(400) ~(60) PG transaction and separation related costs (32) ~(350) ~(90) GEIS acquisition related expenses and integration costs (162) ~(120) ~(30) PPA-related amortization (273) ~(275) ~(70)

FY 2018 recast FY 2019 framework Net finance expenses (190) ~(230) Effective tax rate PG tax impact 25.7% ~27% ~(200) in H2 Capital expenditure (772) ~(850) Cash flow from operating activities (continuing + discontinued) 2,924 Solid

2019 framework

February 27, 2019

1ABB-OS™ simplification program expected to incur ~$350 million restructuring and ~$150 million related implementation costs

Slide 13 February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

Key figures Q4 2018

February 27, 2019

1Calculated on earnings per share before rounding 2Operational EPS growth rate is in constant currency (2014 foreign exchange rates)

Slide 15

Q4 2018 Q4 2017 Change yoy In $ mn unless stated otherwise $ Local currency Comparable Orders 6,985 6,328 +10% +15% +7% Order backlog (end December) 13,084 12,491 +5% +10% +6% Revenues 7,395 6,804 +9% +13% +5% Income from operations 275 324

• 15%

as % of revenues 3.7% 4.8%

• 1.1 pts

Operational EBITA 584 664

• 12%
• 10%

as % of operational revenues 7.9% 9.7%

• 1.8 pts

Net income attributable to ABB 317 393

• 19%

Basic earnings per share from continuing operations ($) 0.10 0.10 0%1 Basic earning per share ($) 0.15 0.18

• 19%1

Operational earnings per share ($) 0.30 0.33

• 9%1
• 6%2

Cash flow from operating activities 1,867 1,869 +0%

February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

Key figures FY 2018

February 27, 2019

1Calculated on earnings per share before rounding 2Operational EPS growth rate is in constant currency (2014 foreign exchange rates)

Slide 16

FY 2018 FY 2017 Change yoy In $ mn unless stated otherwise $ Local currency Comparable Orders 28,590 25,034 +14% +14% +8% Order backlog (end December) 13,084 12,491 +5% +10% +6% Revenues 27,662 25,196 +10% +9% +4% Income from operations 2,226 2,230

• 0%

as % of revenues 8.0% 8.9%

• 0.9 pts

Operational EBITA 3,005 2,817 +7% +5% as % of operational revenues 10.9% 11.2%

• 0.3 pts

Net income attributable to ABB 2,173 2,213

• 2%

Basic earnings per share from continuing operations ($) 0.71 0.67 +5%1 Basic earning per share ($) 1.02 1.04

• 2%1

Operational earnings per share ($) 1.33 1.25 +7%1 +8%2 Cash flow from operating activities 2,924 3,799

• 23%

February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

Total and base orders

February 27, 2019 Slide 17

By division

Q4 2018 Q4 2017 Change yoy In $ mn unless stated otherwise Comparable Electrification Products Total orders 3,139 2,556 +2% 3rd party base orders 3,032 2,394 +3% Industrial Automation Total orders 1,866 1,795 +8% 3rd party base orders 1,639 1,642 +4% Robotics and Motion Total orders 2,175 2,039 +11% 3rd party base orders 1,872 1,837 +6% Corporate and Other Total orders (195) (62) n.a. 3rd party base orders 11 31 n.a. ABB Group Total orders 6,985 6,328 +7% 3rd party base orders 6,554 5,904 +5%

February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

Q4 2018 total and base orders

February 27, 2019

1Change on a comparable basis; 2Defined as orders below $15 mn; 3AMEA: Asia, Middle East and Africa

Slide 18

By region and country

Total orders +7% yoy1 Base orders2 +5% yoy1

Growth by region1 Growth by region1

Europe +2% Germany

• 8%

Italy +1% Sweden +9% AMEA3 +0% China

• 1%

India +2% Australia +17% Americas +13% US +7% Canada +9% Brazil +25% Europe +4% Germany

• 8%

Italy +16% Sweden +8% Americas +12% US +8% Canada +1% Brazil +52% AMEA3 +7% China +6% India +19% Australia

• 7%

February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

End December 2018 End December 2017 Change yoy

In $ mn unless stated otherwise $ Comparable Electrification Products 4,113 3,098 +33% +7% Industrial Automation 5,148 5,301

• 3%

+2% Robotics and Motion 4,016 3,823 +5% +10% Corporate and Other (193) 269 n.a n.a ABB Group 13,084 12,491 +5% +6% Year of recognition 2019 2020 Thereafter Backlog conversion estimate 76% 14% 10%

Order backlog by division

February 27, 2019 Slide 19 February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

Full year 2018 operational EBITA

February 28, 2019 Slide 20

Operational EBITA bridge FY 2017 to FY 2018, $ mn

11.2% op. EBITA margin 10.9% op. EBITA margin 671 552

594 664 584

Net savings Commodities Invest growth,

• incl. digital

Forex

• Op. EBITA

FY 2017

3005

• 106
• 13

+292

• 133

2817

Mix Acq./Div. Net Volume

+381

• Op. EBITA

FY 2018 Other

• 223
• 146

+81 +55

Non-Core

$2.8 bn $3.0 bn

February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

Q4 2018 Q4 2017 Change yoy

In $ mn unless stated otherwise Electrification Products 636 590 +8% Industrial Automation 372 356 +4% Robotics and Motion 476 388 +23% Corporate and Other (78) (9) n.a Discontinued operations 461 544

• 15%

ABB Group 1,867 1,869 0%

Cash flow from operating activities by division

February 27, 2019 Slide 21 February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

Q4 2018 Q4 2017 Change yoy1

$ mn, except per share date in $ EPS EPS Net income (attributable to ABB) 317 0.15 393 0.18

• 19%

Operational adjustments: Acquisition-related amortization 75 65 Restructuring and restructuring-related expenses2 129 108 Non-operational pension cost (credit)

• 6
• 4

Changes in obligations related to divested businesses 14 Changes in pre-acquisition estimates 6 8 Gains and losses on sale of businesses 4 78 Acquisition- and divestment-related expenses and integration costs 56 41 Certain other non-operational items 25 28 FX / commodity timing differences in income from operations 12 Operational adjustments in discontinues operations 108 74 Tax on operational adjustments3

• 96
• 105

Operational net income / Operational EPS 632 0.30 698 0.33

• 6%4

Operational EPS analysis

February 27, 2019

1Calculated on earnings per share before rounding 22017 includes White Collar Productivity implementation costs 3Tax amount is computed by applying the Adjusted Group effective tax rate to the operational adjustments, except for gains and losses from sale of businesses for which the

actual provision for taxes resulting from the gain or loss has been computed

4Operational EPS growth rate is in constant currency (2014 foreign exchange rates)

Slide 22 February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

Regional share of total orders and revenues by division

February 27, 2019 Slide 23

Q4 2018, in % terms

Revenues Orders Electrification Products Industrial Automation Robotics and Motion 35 37 28

Europe Americas Asia, Middle East and Africa

47 22 31 33 33 34 33 36 31 44 20 36 37 30 33

February 28, 2019

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Draft – Privileged and Confidential – Prepared at the request of Counsel

End-customer and product type revenues by division

February 27, 2019 Slide 24

Q4 2018, in % terms

Orders Product type Orders End-customer market Electrification Products Industrial Automation Robotics and Motion 8 35 57 17 62 21 10 75 15 84 6 10 32 24 44 71 13 16

Utilities Industry Transport & Infrastructure Products Systems Services & other February 28, 2019